Crude oil: Nigeria’s 2024 oil revenue threatened as oil traders move away from petrodollar transactions

UGO AMADI

 Significant revenue expectation from oil export which the Federal Government expects to deploy for effective implementation of the 2024 budget may be affected as major global oil traders are moving away from petrodollar transactions.

 

In its 2024 budget proposal the Federal Government has considered conservative oil price benchmark of 77.96 U.S. Dollars per barrel and a daily oil production estimate of 1.78 million barrels per day after a careful review of global oil market trends, and that a Naira to U.S. Dollar exchange rate of 750 naira per U.S. Dollar was adopted for 2024 as well.

 

However, report shows that a fifth of global oil trade this year was settled in currencies different from the U.S. dollar as countries such as Russia and China move away from the petrodollar.

 

Nigeria is pushing to reach and exceed the 2024 crude oil production budget target of 1.7 million barrels per day (bpd).

 

Minister of state for petroleum resources (Oil), Heineken Lokpobiri, said that the country can boost crude oil production to 2 million bpd.

 

The shift from petrodollar business according to JP Morgan’s head of global commodities strategy, Natasha Kaneva, who spoke to the Wall Street Journal and said sanctions have been a major motivator for Russia and Iran to start doing their oil business in non-dollar currencies.

 

“The U.S. dollar is getting some competition in commodities markets,” Kaneva said, just a day after news broke that Russia and Iran have agreed to completely stop using the U.S. dollar in bilateral trade.

 

Indeed, some analysts have argued that the barrage of sanctions that the U.S. leveled on Russia is causing other countries to consider ditching the dollar as a way of insulating themselves from the effect of potential sanctions.

 

“This is something other countries are increasingly concerned about,” William Jackson, chief emerging-markets economist at Capital Economics, told the WSJ.

 

“Some are seeking to reduce their risk of possible sanctions on the use of dollars in trade. China is trying to act as a geopolitical counterweight.”

 

 

Yet sanctioned oil producers are not the only ones eager to ditch the dollar. China has also been

active in replacing dollars in international trade with its own currency, which it seeks to make more global.

 

 

Earlier this month Nikkei Asia reported that the Chinese yuan had become the fourth most popular currency in international settlements in November, overtaking the Japanese yen. The report

explained the development with the more active trade between Russia and China.

 

A month earlier, in October, China also completed the first cross-border payment for oil in digital yuan. Before that, state-owned oil companies made several oil and gas purchases paying for them in the Chinese currency rather than dollars.

 

Per JP Morgan data, there were 12 major commodity contracts that were settled in currencies different from the greenback this year, the WSJ reported, adding that this compared with seven such deals in 2022 and two in the period between 2015 and 2021.

 

Among the 2023 deals were one between the UAE and India for crude oil deliveries to be paid for in rupees, and another a currency swap line between Saudi Arabia and China worth $7 billion.

 

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NLNG delivered 3 cargoes of LPG to local market in December, says Odeh

 

 

The Nigeria Liquefied Natural Gas (NLNG) says it has delivered three cargoes of Liquefied Petroleum Gas (LPG) to the local market in the month to moderate prices and ensure regular supplies during the period.

 

 

Its General Manager, External Relations and Sustainable Development, Mr Andy Odeh, told the News Agency of Nigeria (NAN) on Friday in Lagos.

 

Odeh said that that the delivery would contribute to ensuring a stable supply of LPG to meet the market demand effectively.

 

According to him, NLNG has taken measures to ensure that the market remains well-supplied during the December holiday period.

 

Odeh said that one of the factors that had influenced the decline in LPG prices was the news of the removal of Value Added Tax (VAT) on imports.

 

He also said there had been a moderation in demand due to the holiday season.

He, however, explained that despite these factors, NLNG maintained that it continued to sell LPG based on the West Africa index price, saying,” there is no change in the applicable price index”.

According to him, there is no change to NLNG’s pricing basis, which remains the West Africa index price.

 

“NLNG remains committed to supplying 100 per cent of its LPG to the domestic market.

 

“Regular supplies from other sources within Nigeria and also from imports will help in moderating prices,”he added.